Investment opportunities in San Luis Potosí's construction sector

With GDP growth above the national average, an expanding population and new immigration from abroad, San Luis Potosí’s real estate sector looks set to expand. This will be further encouraged by the deficit of 11,000 homes in and around the capital city, according to Mauricio Ramírez, general director of the State Housing Institute of San Luis Potosí (Instituto de Vivienda del Estado de San Luis Potosí, INVIES).

Yet bureaucratic bottlenecks are presenting challenges to much-needed investment in the area, due mainly to the slowdown in construction permit issuances, as the municipal authorities prepare the Central Population Plan, which will lay down new regulations on the use of land for the capital city. Construction activity in new housing transactions, for example, fell from 16,000 in 2015 to 11,000 a year later. Although the Municipal Planning Institute is right to fix poor practices in legislation, delays in launching the plan have left the industry at a standstill, Ramírez told OBG.

According to Manuel Leal, secretary of the San Luis Potosí branch of the Mexican Association of Real Estate Professionals (Asociación Mexicana de Profesionales Inmobiliarios, AMPI), this is having a negative effect on investment in the city. “This leaves developers with their hands tied, unsure of whether new projects will be profitable or not,” he told OBG.

Ripe For Investment

When the plan is finally resolved, however, the city has the conditions to be a strong investment destination. Starting in 2018, real estate group Thor Urbana is preparing to build a series of new developments in the state, including corporate offices, two hotels, a shopping centre and 400 apartments for a total investment of approximately MXN11bn ($663m). Leal sees Thor Urbana’s project as similar to those in the modern high-rise business district of Mexico City, and notes it will be the first development of this style in San Luis Potosí.

Sky Is The Limit

Without government authorisation for new residential areas, AMPI and other developers are looking upward. According to Ramírez, including a minimum storey limit in certain areas will encourage verticality. San Luis Potosí has cemented its status as a major automotive production centre, but it has some way to go in terms of real estate. “A lot of construction, infrastructure, mobility and services projects are being stopped because they are viewed as too ambitious for this state,” Leal told OBG. “Perhaps in order to attract large-scale construction projects, the state needs to think bigger and start to believe that San Luis Potosí can be a strong economic power,” he added.

Indeed, according to Jimmy Arakanji, founder and co-CEO of Thor Urbana, when announcing investment plans, San Luis Potosí has too often looked over by developers compared to other cities in the country such as Querétaro and León.

Metropolitan Ring

Yet even before the capital’s plan is available, there will be opportunities for expansion in mixed industrial and residential developments. The Ciudad Satélite (Satellite City), for example, is being developed around the Colinas Industrial Park some 16 km outside the city. The area now has 6000 houses and plans to build an additional 30,000. Around 40% of those who work at Colinas are estimated to live in the adjacent residential complex, according to INVIES.

A similar project is under way in Villa de Reyes which houses employees of BMW, GM and Goodyear near the World Trade Centre and Logistik industrial parks. Ciudad Madera (Wood City) will be just three minutes from GM’s plant and include schools, a hotel, restaurants, sports complexes, medical services and shopping areas to accompany the 8000 residential lots, with an initial investment of MXN2.5bn ($150.7m).

These kinds of projects help to provide alternative development attractions, according to Ramírez. “It is an opportune moment to consider San Luis Potosí’s growth,” he told OBG. “The state has potential because of how well it is distributed. The conditions are ideal for real estate investment and development,” he added.